State Aid Law

Shift in focus

State aid law remains an important instrument for the European Commission when it comes to structuring the European domestic market; it can trigger adjustments in policy that do not really fall under the EU’s jurisdiction. The classification of the fiscal loss carry-forward for ailing companies (“Sanierungsklausel”, sometimes referred to as the “restructuring clause” in English) and the Renewable Energy Act as state aid demonstrate what is possible. Both are still pending at the European Court of Justice.

On the other hand, the EC continues to act with restraint as regards state aid law: an act from 2014, which exempted state aid in the agricultural and forestry sectors from having to undergo a review by the EU Commission, has to this day reduced the number of state aid approvals considerably. The amendment passed in May 2017 extended this exemption to aid for financing what is referred to as “local infrastructure” and which includes such things as airports, seaports and culture.

Ruling: takeover of ailing district hospital is not state aid

Another significant ruling which also widens the scope for argument for state aid recipients was made by Stuttgart Higher Regional Court (Oberlandesgericht) on the interface between state aid and public services in the healthcare sector. The German Federal Association of Private Hospitals (Bundesverband der Privatkliniken) had complained that when municipal authorities absorbed the losses accumulated by district hospitals this amounted to an unlawful distortion of competition. The court, however, argued that the subsidies in this case only affected local trade and thus did not constitute state aid.

On the whole, there is a growing awareness of state aid law. Municipal funding authorities, but also aid recipients, buyers of subsidized Mittelstand companies and the banks that finance such transactions, are now seeking advice on the funding options and the related risks well in advance.

Practice groups seek solidarity

Numerous firms are profiting from the greater awareness of state aid. Within the context of declining notifications, they are now reviewing the regional and sector-related state aid risks in projects. Law firms such as Müller-Wrede & Partner are doing well here and increasingly advise their clients on existing opportunities for aid, funding pools and applications. State aid lawyers quickly find they have a role to play as part of project-related advice, often together with public procurement and contract lawyers.

Freshfields Bruckhaus Deringer, Gleiss Lutz and Linklaters are thus focusing on international state aid advice or bank-related work. Nevertheless, at these firms, and some US competitors, the emergence of tax issues as a part of state aid is having an impact, with state aid and tax lawyers showing ever more solidarity.

 

State aid law includes many aspects of European law; therefore ?antitrust and public law experts, as well as lawyers in Brussels, are typically active in this practice area. As state aid questions often arise in the financing, construction and operation of infrastructure facilities, further information can be found in the chapters on ?energy law and ?public procurement.

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